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ARDEN HILLS CITY COUNCIL WORK SESSION—FEBRUARY 27, 2012 2 Director of Finance and Administrative Services Iverson reviewed the two options; leaving the 5,000 gallon user the same would result in a $16,000 increase, leaving the 10,000 gallon user the same results in a $103,000 decrease in revenue. Further discussion ensued regarding potential utility rates. Councilmember Holmes wanted to see the rates reduced for those using less than 10,000 gallons. Director of Finance and Administrative Services Iverson indicated this was the case with the second utility rate option. If this option were to be selected, the City could see a net loss of approximately $103,000 in water revenues per year. She reviewed the numbers in further detail with the Council. Councilmember Holmes stated the residents using 5,000 gallons are currently paying the same amount as those residents using 10,000 gallons. She suggested the Council seek further changes. Councilmember Tamble encouraged the Council to consider the value of the City's water. Councilmember Holden indicated that the property owners in the City of Roseville and the City of New Brighton paid less for their water bills. Director of Finance and Administrative Services Iverson cautioned the Council from comparing the City's water fees to each of these communities as the water was billed differently. She stated some cities used TIF districts to assist with water rates. She added that Arden Hills does not assess for water improvements, which needed to be reflected and fully understood within our water rate structure. Councilmember Holden indicated the population of the City was aging and that 46% of the residents used less than 5,000 gallons of water per quarter. Due to the fact these residents were paying for 10,000 gallons, they feel no need to conserve water. Councilmember Tamble questioned what a proper solution would be. Councilmember Holden suggested the residents be charged per gallon, starting with gallon one. Director of Finance and Administrative Services Iverson indicated a new rate schedule would allow for water to be billed out from one gallon of use. Councilmember Holmes expressed concern that the 8,000 gallon users would be paying more with the new rate than those currently using 10,000 gallons. She questioned why this should proceed. Director of Finance and Administrative Services Iverson indicated the rate structure was changing and fixed costs still needed to be covered. Mayor Grant stated an adjustment was necessary to cover the gallons used, but the fixed costs were not considered.